Public & Product Liability

Public liability insurance is the safety net that protects NZ motor trade businesses from the financial consequences of accidents involving members of the public. Product liability extends this protection to claims arising from vehicles, parts or other products you have sold or supplied. Together, these covers are essential for any customer-facing automotive business.

## How Public Liability Works in the NZ Context

New Zealand's ACC scheme provides no-fault personal injury cover — meaning injured parties cannot sue for personal injury in the way they can in Australia or the UK. However, ACC has important limits:

- ACC does not cover property damage - ACC does not cover consequential economic losses (lost income, business losses) - ACC does not cover legal defence costs you incur when defending a claim - ACC does not cover exemplary damages (punitive damages in egregious cases) - ACC does not cover claims made by overseas visitors who may have limited cover

This means a customer who slips in your workshop and breaks their wrist has their medical costs covered by ACC — but if they claim for lost income as a self-employed tradesperson, or seek exemplary damages for a particularly dangerous hazard you failed to address, your business is exposed. Public liability pays for your legal defence and any court-ordered damages.

## Product Liability for Motor Traders

Product liability is a critical but often underappreciated cover for motor traders. It covers claims arising from:

Vehicles sold: If a used car dealer sells a vehicle with a pre-existing safety defect and a buyer is subsequently injured or suffers property damage, the dealer can face a significant product liability claim. The Consumer Guarantees Act 2003 gives buyers strong rights for defective goods — a vehicle that does not meet the reasonable quality guarantee creates direct liability.

Parts sold or fitted: An incorrect part specification, a faulty part supplied and installed, or a part that fails due to quality issues can trigger claims from vehicle owners. Tyre dealers, parts suppliers and auto accessory retailers are all exposed to product liability claims.

Vehicles repaired and returned: If a workshop completes a brake service and a brake failure subsequently causes an accident or property damage, both professional indemnity and product liability may respond. The boundary between these two covers can be complex — work with a broker who understands motor trade-specific policy interactions.

## Limits: How Much Do NZ Motor Traders Need?

The NZ market standard for motor trade businesses is typically:

- $1 million: Minimum for very small operations with limited public access - $2 million: Standard for most workshops, small dealerships, and mobile operators - $5 million: Recommended for dealerships with significant foot traffic, test drive programmes, or sales of high-value vehicles - $10 million+: Large franchise dealerships, businesses operating in high-risk environments, or businesses contractually required by landlords or fleet operators

The cost difference between $2 million and $5 million cover is often surprisingly small — typically a few hundred dollars annually — making the higher limit generally good value.

## NZ Regulatory Context

The Health and Safety at Work Act 2015 (HSWA) imposes strict obligations on all businesses to manage workplace risks. For motor trade premises with public access — showrooms, service waiting areas, parts counters — the duty to eliminate or minimise the risk of customer harm is a compliance obligation, not just good practice. A failure to comply with HSWA can result in regulatory fines and enforcement action on top of civil liability claims. Some HSWA-related fines can be covered by statutory liability insurance (a separate but related cover).